Sales Tax Due on Snowmobiles Purchased in Maine
- Sales Tax News
- Oct 28, 2013 | Gail Cole
Maine has 14,000 miles of snow trails, and when there is snow on the ground, many people travel to Maine to explore those trails. It is not uncommon for enthusiasts to buy snowmobiles while in Maine. When they do, is sales or use tax owed?
Maine Revenue Services has recently amended Instructional Bulletin 47, regarding the original registration of watercraft, snowmobiles and all-terrain vehicles. The change pertains to purchases of snowmobiles and all-terrain vehicles “sold to or used by a nonresident.”
Prior to October 9, 2013, sales of “snowmobiles and all-terrain vehicles to individuals who are not Maine residents were exempt from sales tax; the exemption did not apply to purchases by corporations or other business entities.”
The exemption does not apply to sales to nonresident individuals made on or after October 9, 2013, unless the snowmobile or all-terrain vehicle is removed from Maine. “If the vehicles are subsequently registered for use in Maine within 12 months of the date of purchase, the person seeking registration is liable for use tax based on the original purchase price.”
However, snowmobiles and ATVs purchased by individual nonresidents and used outside of Maine, “and then used in Maine,” are exempt from use tax. (See 36 MRSA §§ 1760(25-A), (25-B) & 45(A-2).)
Anyone interested in purchasing or using a snowmobile, ATV, or watercraft in Maine may want to read on and review sales and use tax obligations covered in the bulletin:
Use tax is owed on vehicles purchased for use in Maine from “someone other than a Maine registered dealer,” unless the transaction is exempt. Prior to being registered in Maine, the person registering the vehicle must complete a a Use Tax Certificate (Form S.T.M.V. 6U) and submit it, along with any use tax due, to the Commissioner. If sales tax was paid to another state at the time of purchase, the registered owner may “apply for credit for taxes paid in another jurisdiction.” If Maine’s sales tax is listed on the bill of sale but that sales tax actually represents Maine use tax included in the financed amount of the sales transaction, that use tax must be paid at the time of registration.
Use tax is owed on snowmobiles purchased from a seller “not in the business of selling at retail.” A completed Use Tax Certificate must be remitted to the Commissioner, along with payment, prior to the original registration of the vehicle. The same holds true for watercraft.
An exception is made for casual sales to “a corporation, partnership, limited liability company or limited liability partnership… when the seller is the owner of 50% or more of the common stock of the corporation, etc. However, transfers “From a corporation, etc, to another party, including one of its shareholders or owners, is generally taxable as a casual sale if the shareholder, owner or employee provides payment or other bargained-for consideration for the transfer.” The tax treatment of such transactions are handled on a case-by-case basis.
Transfers of equity
The state of Maine considers a transfer of equity to be a sales transaction. When loan balances are assumed, use tax “is owed by the new owner based on the amount being assumed.” When there is a transfer of owner interest (when a vehicle is jointly owned and one owner’s interest is transferred to one or more of the other owners), the transaction is considered a casual sale and use tax is owed on the value transferred by the other owners. Use tax is owed even if the transaction occurs between family members, such as husband and wife or parents and adult children.
The Instructional bulletin goes on to define sales price and what it includes and does not include. For example, it includes processing fees and manufacturer’s rebates but not state inspection fees or finance charges. If the casual sale involved the exchange of property rather than cash and if the value of the transaction is “not documented or otherwise established,” then the sale price is set at the item’s “fair market value.”
Sales or use tax is due on the “difference between the sale price of the purchased item and the trade-in value allowed for the item or items taken in trade” so long as the trade in is for an item “of the same kind.” In other words, there is a tax advantage to trading in one snowmobile for another snow mobile, but not for trading in a snowmobile for a watercraft. The entire sales or use tax of the purchased item is due in these situations.
Sales and use tax exemptions may apply to transactions involving all-terrain vehicles, snowmobiles and watercraft when sales are made to government agencies and exempt organizations such as Maine school districts, village corporations, hospitals and houses of religious worship.
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